What is a partnership?

In a partnership two or more people run a business together. Each partner contributes something to the business and in return:

shares in any profit or loss, and

is liable for any debt within the partnership.

What is a look-through company (LTC)?

Companies with five or fewer shareholders can elect to be an LTC. Shareholders of an LTC are liable for tax upon the company's profit. They can offset the company's losses against their other income (subject to a loss limitation rule). An LTC is "looked-through" for income tax purposes.

the value of the partners' contributions made by way of services or capital, and

any other relevant matters.

Note

We cannot reallocate a partners' share of income or losses if there is a bona fide contract.

Filing a partnership and look-through company income tax return (IR7)

A partnership or look-through company (LTC) must file a Income tax return: partnerships and look-through companies (LTCs)(IR7) every year. The partnership or LTC is not assessed for tax, but each partner or owner is liable for tax on their share of the income from the partnership or LTC.

Partnerships

A partnership must file an IR7 return, attaching the Partnership details (IR7P), until the partnership ceases and we are advised. An IR7 return must be filed for the year in which the partnership ceased.

Each partner in a partnership must file an Individual income tax return (IR3) showing their share of any income, expenses and tax credits from the partnership, as shown on the IR7P.

Look-through companies (LTCs)

A look-through company (LTC) must file an IR7 return, for every year that it is registered with the Companies Office unless it has completed a Non-active company declaration (IR433). It must attach the Look-through company (LTC) income/loss allocation (IR7L) for each owner of the LTC. An IR7 return must be filed for the year in which the LTC ceased.

Each look-through owner in a LTC must file their relevant income tax return showing their share of any income, expenses and tax credits from the company, as well as any non-allowable deductions, as shown on the IR7L.